Does Dov Charney Have Something Up His Sleeve?

0

Has American Apparel Inc. bounced back?

The downtown L.A. clothing maker and retailer just months ago was saved by a last-minute investment. Now, it’s reported improving sales and has been announcing plans to boost profitability.

The company is going to open more stores-within-stores. And it’s extending its reach through partnerships with online retail giants eBay Inc. of San Jose and Asos plc of London.

“They have two initiatives that look exciting, one is eBay and two is having these stores-in-stores,” said Howard Davidowitz, chairman at national retail and consulting firm Davidowitz & Associates Inc. in New York. “It gives you a chance to build sales without investing a tremendous amount of capital, and for them that’s critical.”

American Apparel faced a liquidity crisis this spring that put it on the brink of bankruptcy. A group of Canadian investors rescued the company in April with a financing package worth about $43 million. The money bought American Apparel time to turn around operations and boost sales.

Last year, American Apparel opened stores-within-stores at posh U.K. department store Selfridges in London and French department store Galeries Lafayette in Paris. The stores are smaller versions of the company’s stand-alone shops, and feature merchandise selected to appeal to local tastes.

Chief Executive Dov Charney told the Business Journal he plans to open more of them.

“We can scale that business model to 40 or 50 store-in-store operations,” said Charney, who added the company is working out a deal with upscale U.S. department store Bloomingdale’s, but no announcement has been made yet.

American Apparel is also expanding its online presence.

EBay is set to launch on its site next month an American Apparel shop, which the downtown company expects to become a multimillion-dollar business in the next year.

The store, which will display American Apparel’s racy advertising, will feature the company’s basic T-shirts, underwear and jeans. EBay is expected to promote the American Apparel store with e-mail newsletters and other marketing programs.

After a successful test run earlier this year, American Apparel also expanded its partnership with international e-commerce site Asos, which features clothes and accessories from designer brands such as Calvin Klein.

Asos is purchasing men’s and women’s clothes from American Apparel wholesale and reselling the merchandise on its site, a model that’s expected to boost American Apparel’s wholesale business. The relationship also gives American Apparel the opportunity to reach shoppers in countries such as Denmark, Russia, New Zealand, Singapore and Hong Kong, where the company does not currently have stores.

Charney suggested that American Apparel is considering broadening its sales by also manufacturing clothes for other apparel makers at its sprawling downtown factory, although no deals have been struck yet.

Meanwhile, American Apparel has started showing better results in its retail stores. Last week, the company reported same-store sales rose by 3 percent in June and 4 percent in July.

After closing about 26 underperforming stores since the second quarter of last year, Charney said the company has improved operations at its stores to better serve customers. He said the company is also realizing that it needs to focus on its stores located in major international cities to boost sales.

“We are resigned to the fact that it’s going to be appealing to people who are in cities rather than suburbs,” Charney said. “One of our most profitable stores is in Seoul, (South Korea), and others that are highly profitable are in Sydney and Melbourne, (Australia). We are seeing where the brand works.”

Davidowitz said it’s too early to pronounce a turnaround, but that things are looking positive.

“I give credit to Dov Charney,” he said. “His whole life he pulls rabbits out of his hat and I don’t know how he does it but he did it again. And now suddenly there’s a new day.”

No posts to display